Yellen Details Regulatory Views in Responses to Senators

Janet Yellen, President Barack Obama’s pick to be the next leader of the Federal Reserve, offered further detail on her regulatory views in a series of written answers to senators’ questions.

Reuters

Janet Yellen

In response to questions about how the Fed will regulate large insurance companies, Ms. Yellen indicated there could be limits to how differently the central bank can treat them from banks. The Fed is set to regulate certain large insurance companies for the first time under the 2010 Dodd-Frank law.

The written responses from Ms. Yellen elaborated on the position she offered senators during her confirmation hearing last week.

At the hearing, she said that the Fed would take a flexible approach to those rules, saying that “one size fits all should not be the model for regulation.” Analysts said at the time that the comment should ease concerns that insurance companies would face tough capital requirements similar to those faced by banks.

Ms. Yellen’s written responses, however, indicated that she believes the Fed can only go so far in tailoring its rules to insurers. She told Sen. Mike Johanns (R., Neb.), that Dodd-Frank “constrains the scope of the Board’s discretion” in that area and cited a part of the law that says capital requirements for non-bank firms, including insurers, “shall not be less than” those for banks with federal deposit insurance.

Ms. Yellen wrote that the Fed board would consider designing rules appropriate to the insurance industry “to the extent permitted by law.”

Ms. Yellen’s written answers to three more members of the Senate Banking Committee — Sens. Mike Crapo of Idaho, the panel’s top Republican; Mr. Johanns; and Jerry Moran (R., Kansas) — cover a variety of issues on the regulatory side of the Fed’s agenda, including bank capital rules, the controversial Volcker rule and how the central bank plans to regulation firms that aren’t banks but have been deemed a threat to the financial system.

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